The Other Way to Avoid Plan C
Plan C is coming. Plan C is coming. Plan C is coming. Even if certain aspects of the plan are a charade, the mayor has made clear that if Harrisburg doesn't help out, draconian cuts to city services are an inevitability. But is there another way? The answer is a definite maybe. Normally, because of a ruling from the 1950s, Philadelphia can't raise taxes in the middle of the fiscal year. There may, however, be a loophole. Instead of laying off nearly 1,000 police officers and closing all libraries and recreation centers, Philadelphia might be able increase the dreaded wage tax. The gaming act, passed by the legislature in 2006, has a provision that allows Philadelphia to increase the tax if certain emergency conditions are met. If any one of the following things happens, the increase would be allowed: - The city finance director certifies that Philadelphia faces a “fiscal threat that affects the citizens of the city.” - Tax revenue decreases by more than 2 percent in a fiscal year. - The Pennsylvania Intergovernmental Cooperation Authority (PICA) disapproves the city's five-year plan. - Federal or state law requires a new unfunded mandate that costs more than 1.5 percent of the city's general fund. - The cost of an existing mandate increases by more than 1.5 percent.
The Other Way to Avoid Plan C
Plan C is coming. Plan C is coming. Plan C is coming. Even if certain aspects of the plan are a charade, the mayor has made clear that if Harrisburg doesn't help out, draconian cuts to city services are an inevitability.
But is there another way? The answer is a definite maybe. Normally, because of a ruling from the 1950s, Philadelphia can't raise taxes in the middle of the fiscal year. There may, however, be a loophole. Instead of laying off nearly 1,000 police officers and closing all libraries and recreation centers, Philadelphia might be able increase the dreaded wage tax.
The gaming act, passed by the legislature in 2006, has a provision that allows Philadelphia to increase the tax if certain emergency conditions are met. If any one of the following things happens, the increase would be allowed:
- The city finance director certifies that Philadelphia faces a “fiscal threat that affects the citizens of the city.”
- Tax revenue decreases by more than 2 percent in a fiscal year.
- The Pennsylvania Intergovernmental Cooperation Authority (PICA) disapproves the city's five-year plan.
- Federal or state law requires a new unfunded mandate that costs more than 1.5 percent of the city's general fund.
- The cost of an existing mandate increases by more than 1.5 percent.
Given the terrible impact of Plan C, it would seem pretty clear that the first condition has been met. Also, it seems very likely that revenue will decrease by 2 percent or more. If PICA certifies that either of those conditions exist, then City Council would need to muster 10 votes to pass the increase.
Still, the issue of a lawsuit lingers. I asked Richard Feder, a deputy City Solicitor, if the city thinks the gaming law allowed a tax hike in the middle of the year.
“The gaming act is silent about when the increase can occur,” said Feder. “The easiest way to interpret the law is that the city can't raise taxes in the middle of the fiscal. However, the increase is also clearly meant to happen in the event of an emergency. Why give the city emergency powers if we're going to have to wait a year for help? So there are arguments on both sides.”
Nothing like a definite maybe. The option would, presumably, be tempting. The wage tax is one of the only taxes that could actually generate enough revenue to fill the budget gap. Right now, the city expects about $1.5 billion from the wage tax in the next fiscal year. Philadelphia could increase the rate enough to generate another $100 million and stop the worst of the budget cuts. The city would need an increase of between 6 ½ and 7 percent.
So why not go this route if Harrisburg fails to act? Well, politics could complicate things. If Philadelphia raises the wage tax, it could anger suburban lawmakers with constituents who work in the city. Harrisburg probably couldn't repeal the increase, but the city could face retaliation in other ways. For example, the state might cut an equivalent amount of funding in other areas, like human services. That would create yet another hole in the budget that would need to be filled.
But a bigger barrier might be in City Hall. Mayor Nutter spent his entire career in City Council fighting to cut the wage tax. He also rejected the option during budget negotiations in March. Still, the city is supposedly on the verge of shutting down the entire court system, among other unthinkable cuts. If anything can get the mayor to rethink his position, wouldn't it be this?
This is a really great post Ben. I don't think I'd been fully tuned in to how bad it has gotten here until recently. It really, really makes me want to re-up those thoughts about moving back to D.C. that were haunting me about a year ago.
The city's cost structure cannot be maintained; if Nutter and City Council insist on doing nothing to rein in those costs, the city can experience the pain of those costs either (i) in the short-run through draconian service cuts or (ii) in the long run through tax increases that will drain an already dwindling tax base.— PhillyTaxes- Good piece. Total speculation but maybe is the underfunding of the courts and DA's office in Plan C in there intentionally to make it easier for the mayor who opposes wage taxes to "be forced" to raise them if Plan C goes down as a result of the State Senate. Would be very Nutter to set things to set it up to "be forced against his will" if he can't do it anyother way.— seand
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- No its what people like you get for pushing for State Senate Republicans who can't even work things out with the House to vacate the expressed will of the poeple of Philadelphia via their locally elected representatives. You Clean Up Philly are the one opposed to local authority and the democratic process in terms of how it should work in this process. If local R's use connections to state R's to overreach, they need to take responsibility for that over-reaching's results.— seand
- In terms of opening up gaming law to tweaking its impact on local budgeting authority, I bet a lot of casino opponents would welcome such an action. Opening up that bag of worms would be viewed by them to try push for resiting or just eliminating Philly's casinos entirely. Its something neither Pileggi nor Rendell want to reopen and tinker with, I guarantee it.— seand
- We will never collect the $1 billion in forfeit bail, for better or worse. You can't collect money from fugitives from the law you can't catch or from destitute people already serving time. Thats a bogus number. The best you can do is change the system to stop money from flowing out the door - which we should do.— seand
- We will never collect the $1 billion in forfeit bail, for better or worse. You can't collect money from fugitives from the law you can't catch or from destitute people already serving time. Thats a bogus number. The best you can do is change the system to stop money from flowing out the door - which we should do.— seand
- We will never collect the $1 billion in forfeit bail, for better or worse. You can't collect money from fugitives from the law you can't catch or from destitute people already serving time. Thats a bogus number. The best you can do is change the system to stop money from flowing out the door - which we should do.— seand
- Raising the wage tax would be another example of treating the systems and not the cause of what is wrong with this Philadelphia's finances. Nice piece of lazy journalism. When are you guys going to starting hammering this administration on the structural changes this city needs?— 10andfitz
- 10andfitz, you did read the very last entry, right? Sounds like structural changes to me. http://www.philly.com/philly/blogs/our-money/Seventy_Gets_Specific.html Covering the news means asking both the questions you like and the ones you don't like. What Waxman asks about is an option some people strongly support. Not you or me, but those people are not without their logic, their reasons. Its a valid question.— seand
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